As South Africa recently struggled with a sluggish economy, the Transport Sector Retirement Fund (TSRF) experienced the effect thereof on some of their small medium enterprise (SME) employers.

The transport sector was one of the industries affected by the constricting economy which resulted in some employers in this sector experiencing a slow-down of their business operations leaving them cash strapped. On-going fuel hikes compounded the problem.

Of the Fund’s 3000 employer-members, 3% of businesses became non-compliant in terms of the stipulations of the Pension Fund Act.

At the time (2017/2018), the Office of the Pension Fund Adjudicator (OPFA) experienced the same trend, reporting that as much as 70% of all complaints received (by the adjudicator) concerned the non-payment of withdrawal benefits or dissatisfaction with benefit amounts paid out. In terms of the Fund rules, benefits can only be paid out to a member/s once a participating employer is fully complaint.  

Joe Letswalo, principal officer, of the TSRF said the Fund and its administrators, also noticed that employer-members (mostly SMEs) were buckling under financial strains and that these pressures were filtering through to the Fund. “Although 97% of members still managed to navigate the economic downturn, we realised that a small percentage of our members were finding it difficult to honour their legal obligations to pay their monthly contributions to the Fund and we, therefore, determined that pro-active steps had to be taken to address the situation,” explained Letswalo.

The Fund’s Board of Trustee are committed to serve the best interests of all their members.

“It was clear that more damage would be caused if we simply brought High Court applications to have these smaller non-compliant employers liquidated (as the Act and the Fund rules allow). Liquidating non-compliant companies would result in individual members losing their retirement benefits, and it would also affect their conditions of employment. With the unemployment rate already at 27.5%, we considered this option to be an ineffective solution,” stressed Letswalo.

The Financial Sector Regulations Act makes provision for an Ombud Council (the Office of the Pension Fund Adjudicator) which is a statutory body and which is tasked to ensure effective, independent, fair and timely dispute resolution on behalf of its customers.  In this regard, the OFPA provides a vehicle to enforce overall compliance and effectiveness.

“The TSRF is unique in that the Fund was initially established under the Bargaining Council, and thus (at the time) membership to the Fund was compulsory. This places the TSRF in a different position to other big umbrella funds. Normally, umbrella funds will just liquidate non-compliant employers because it is a voluntary association. The TSRF, on the other hand, is committed to first and foremost making every attempt to rescue non-compliant businesses before taking any further actions,” explained Letswalo.

Considering all these factors, the TSRF launched an initiative to address non-compliance on a number of levels. This included education and awareness campaigns to inform members of their rights; the responsibilities of their employers; provisions made in the various Acts; and how and where to lodge complaints.  The TSRF also started to immediately notify individual members (via sms) when any of their employers became non-compliant. By doing so, members were now in a position to take quick action; and at the same time the TSRF (together with its administrator, Salt EB) could also actively lodge applications to the OFPA to enforce compliance.”

The Transport Sector Retirement Fund’s initiative is without a doubt proving to be successful. Since embarking on this approach, 99% of the TSRF’s referrals have been approved by the OFPA and are now successfully enforced.

According to Leslie Primo, head of Salt EB’s legal, risk and compliance unit, complaints have significantly reduced from 66 complaints in 2017/2018 to the administrator dealing with an average of only eight complaints per month at the end of 2018.  

“We are confident that we have turned a corner. Employers who have found themselves in dire straits have now entered into long term agreements to settle their outstanding debts to protect their business interests and their employees’ benefits. Our collection rate is currently well more than 97% as our employer-members’ businesses are becoming viable again and their chances to full recovery continue to improve.

My outlook for the transport sector in general, and in particular for the members of our retirement fund, is optimistic. We are making good progress. Our investment strategy is proving successful and we have just received an overall Gold Standard Award from the Institute of Retirement Funds Africa (IRFA) for meeting all the criteria in the following areas of excellence: governance; transformation; stakeholder engagement and education; investment practice, trustee development; and financial management and reporting,” ended Lestwalo.

 Mover-shaker Transport Sector Retirement Fund recognised as national industry leader 

The Transport Sector Retirement Fund (TSRF), a non-aligned, standalone fund whose shareholders are its members, has been recognised by its peers as an innovative trailblazer in the industry. In January this year, the TSRF was awarded top honours at the Institute of Retirement Funds Africa (IRFA) annual Best Practice Industry Awards for 2018.   

The TSRF received the overall Gold Standard Award for meeting all the criteria in the following areas of excellence: governance; transformation; stakeholder engagement and education; investment practice, trustee development; and financial management and reporting. The fund also won the Investment Practices category and received a Best Practice certificate in the Transformation category. 

Joe Letswalo, principal officer of the TSRF, says the fund differentiates itself from many others with its single-minded focus on maximising members’ benefits and making a tangible difference in members’ lives. “We have a very strict impact-driven investment orientation which enables us to achieve our set growth targets. We recently improved members’ death and disability benefits from two times annual salary to three times annual salary, and funeral cover from R30 000 to R50 000 for the member and spouse at no increase in costs to them. All the proceeds of the funds’ initiatives are reinvested and we pursue ways of finding savings, such as the more than R700-million we have generated through our self-insurance initiative.” 

The fund has about 70 000 members, 70% of whom are truck drivers working in one of the many sectors in the transport industry. “With them in mind we have developed a responsible-investment strategy to build truck stops that ensures our members and the broader transport sector community are able to park and sleep safely and also have access to accommodation, refueling, mechanical services, primary healthcare- and appropriate nutrition facilities,” says Letswalo. “The first of these truck stops, the Harrismith Highway Junction Truck Stop, is one of the biggest in Africa and has provided a more than 25% return on investment over the past 12 months. It is now one of the largest work providers in Harrismith, employing 200 locals.” 

Letswalo is justifiably proud of the TSRF’s engagement and education strategy, which strives to improve members’ knowledge of fund benefits and investments. The preferred communication method is SMSes, with online media, including the TSRF’s website and Facebook, also being successfully deployed in staying in touch with members. Regular clear communication messages help to keep members abreast of an array of financial concepts. “We don’t pay lip service to effective stakeholder engagement,” says Letswalo. “The majority of members access the internet via their cellphones and so we’ve adapted our communication strategy accordingly. Our website is now the top source of information on the fund. Members prefer to access fund-related information by this means. We are talking directly to them.” 

As far as transformation is concerned, the TSRF has placed a target of more than 70% of its assets to be managed by black-owned investment firms. “To date 75% of the fund’s assets are invested with black-owned and transformed managers,” says Letswalo. “We’ve extended this to our stockbroker policy, which gives clear guidelines on the percentage allocation given to black-owned firms. In addition, all the asset managers appointed by the fund allocate more than 50% outsourcing to black-owned business.” 

The fund’s achievement of its transformation objectives has not always been smooth sailing. A number of initiatives had to be adopted to ensure the sustainability of the transformation success. The objective was for the fund to walk the transformation journey with its appointed asset managers to ensure success.

“We realised that the playing fields for our appointed asset managers were not conducive to maintain the success levels, especially with regards to competition with the more well-resourced and established traditional asset managers, says Letswalo. “So, the fund convened an indaba with all the appointed asset managers whereby issues related to performance, good governance, resourcing, support and best practice were discussed. It was important that the asset managers understood that the fund’s success is also their success. At this meeting, they again unanimously pledged to uphold best governance procedures and to cooperate to advance the fund’s transformation agenda.” 

Furthermore, TSRF’s robust internal controls, including frequent internal audits to evaluate best business practices and address potential risk factors, allow the fund to excel in good governance and compliance. The fund received clean internal and external financial audits for the past eight years.  

Having grown the TSRF’s assets from R2-billion in 2013 to R7.5-billion in 2018, Letswalo is confident that the fund’s outlook is positive and its various strategies on target. “We are definitely shaking up the industry with our nimble investment strategies and people are really starting to sit up and take notice. We run a clean business where we place our members at the heart of it, and we are grateful that the industry has given us recognition for it,” says Letswalo.